Maine Nicked by Offshore Scandals Embroiling Other Countries

The fallout of last month’s Panama Papers leak seems to only be growing. A massive leak of information from a Panamanian law firm that helped set up shell companies in tax havens turned out to include a lot of famous names. The stereotypical use for these firms is to hide money from tax authorities, sometimes legally, sometimes not—although there are other uses, such as making international transactions easier and protecting privacy. It is embarrassing at the very least for a country’s leader to be found in the list. Hiding money from your own country’s taxes, no matter if it’s legal or effective, is never a good look. Indirectly, the issue has even landed in Maine news. It has recently come to light that Democratic Party financier Donald Sussman, Rep. Chellie Pingree’s ex-husband, was named in a data leak from 2013 referred to as the Offshore Leaks. As is par for the course for people and companies in the U.S. with a lot of money, Sussman was making use of the offshore financial system, which most do to avoid taxes, although the details are hazy in his case.

If it was not already known, the Panama Papers made it obvious that Donald Sussman is not in the best company. But he should be happy to know that the political fallout of his offshore dealings is going to be a lot less than what has hit politicos in other countries, Free Beacon articles aside. The reactions in some countries were enormous, in some cases reaching the highest levels. Here is a sampling of the events.

China

One of many notoriously corrupt countries that showed up in the leak was China—a country with enough wealth to make it worth stashing some overseas. The notable thing about China’s case was how swiftly any and all mentions of the Panama Papers were censored. The first stories on the Panama Papers were published on April 3rd. By the next day, online discussion of the topic was already being censored in China. By the 6th, it was revealed that the government had already given the order to remove any and all content related to the leaks:

Given the optics, it is not surprising that the government was quick to ban discussion of the topic. Nine of the country’s most important families were implicated in the leaks, including leader Xi Jinping’s sister and brother-in-law. Given that Xi has made a ruthless anti-corruption campaign a hallmark of his tenure, public knowledge of his own family’s financial impropriety would not bode well.

Iceland

The only place where a politician seemed to face direct consequences for the Panama Papers was in Iceland. The Prime Minister resigned after it was revealed that he had set up a holding company in the British Virgin Islands, now owned by his wife. Thousands protested for his resignation after the revelations, and they got their wish. In a move that was very telling of the Icelandic government’s priorities, he was replaced by the Minister for Fisheries and Agriculture. The opposition has called for new elections, but have yet to get their wish.

Pakistan

As one of the many places in the world where everyone is corrupt but only get hammered for it when specific instances come to light, it was not surprising to see Pakistan hit by the Panama Papers. Three of Prime Minister Nawaz Sharif’s children were found to own offshore companies used to buy foreign assets, and that wealth did not show up on the family’s wealth statement. Sharif comes from a wealthy industrialist family, so it is not at all surprising that they would be taking advantage of international tax havens, but it is nevertheless a scandal. After predictable calls for Sharif’s resignation from the opposition, he said “I challenge all those who allege tax fraud to come forward and present evidence. If charges are proved against me, I will resign immediately”—something people often say before never, ever resigning. He wrote to the Supreme Court to request that they set up a commission of inquiry to investigate the matter, but the Chief Justice replied that he would not do so, saying that it would be a “toothless” body.

In a fortunate turn for Sharif, one of the opposition leaders attacking him for the Panama Papers link, Imran Khan, just recently admitted to using an offshore company to skirt taxes in the U.K. for a property sale. This company actually predated most of what was in the Panama Papers, being set up in 1983. According to one Pakistani journalist, Imran Khan “is pioneer in offshore company formation, among Pakistanis. Not only the oldest, his company remained operational for the longest period.” It is expected that Imran Khan will lay off Sharif somewhat over the issue now.

Russia

Russia is apparently a very good place to be a cellist, at least if you’re a friend of Vladimir Putin. Cellist Sergei Roldugin is apparently in control of at least $100 million in assets as part of the intricate financial network surrounding Putin. The leaks are revealing in that nothing has Putin’s name on it. They show $2 billion flowing into offshore companies through a Russian bank run by another friend of Putin’s. Estimates of Putin’s personal financial fortune vary widely, with some saying that he could have as much as $200 billion, and others guessing around $40 billion. In reality it’s impossible to know, and there may be no clear lines around his personal fortune and the assets he effectively controls. What is clear, however, is that transactions like those found in the Panama Papers are one of the ways his patronage network runs. An interesting theory—and it is just a theory—is that Russia was actually behind the leak. Putin’s Russia has long been lambasted for cronyism, so this was a way to show that the rest of the world does it too, so the thinking goes.

United Kingdom

A scandal erupted over Prime Minister David Cameron showing up in the Panama Papers, but it was more fueled by poor politics than financial misdeeds. The Economist explains it best:

“The Panama papers leak revealed that the prime minister’s late father, Ian, had something called a “unit trust” fund, whereby a group of people pool their money (by buying shares, or units, of the total kitty) and use it to invest in a variety of securities, spreading the risk. Its incorporation offshore, initially in Panama, was seemingly motivated by administrative convenience rather than tax-dodging: the Camerons paid British taxes on their income from it… But concerned for his family’s privacy and anxious to keep his father from appearing in the Panama coverage alongside crooks and drug lords, Mr Cameron let the story run away from his control by insisting that it should be treated as a private matter. So Downing Street stonewalled journalists. And this created the impression that he had something to hide…”

The result was a media firestorm but no direct consequences for Cameron. It has been a few weeks, and he is trying to make the kind of tax dodging people thought he was doing more difficult by hosting an anti-corruption summit. The summit has received ridicule for not including countries like the British Virgin Islands and, perhaps most notably, Panama.

Another big British name linked to the Panama Papers was Emma Watson, of Harry Potter fame. She had set up the company so that she could purchase property anonymously, possibly to avoid trouble with stalkers, which she has had in the past.

All Donald Sussman has had to deal with are a couple articles and this blog post. No resignations, no commissions of inquiry, and no media firestorm. He must feel lucky by comparison.

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About Phoenix McLaughlin

Phoenix McLaughlin works at the National Endowment for Democracy helping to foster political development in Asia. Phoenix lives in Washington, D.C. now, but was born and raised in Norway, Maine. In between, he has studied and/or worked in Colorado, Nepal, India, France, Ethiopia, and Augusta. All opinions expressed on this blog are solely his own and do not represent his current or former employers.

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Phoenix McLaughlin

Phoenix McLaughlin works at the National Endowment for Democracy helping to foster political development in Asia. Phoenix lives in Washington, D.C. now, but was born and raised in Norway, Maine. In between, he has studied and/or worked in Colorado, Nepal, India, France, Ethiopia, and Augusta. All opinions expressed on this blog are solely his own and do not represent his current or former employers.